China crisis?

Posted on Thursday 30th January 2014

Professor Mark Exworthy, Health Services Management Centre

David Nicholson famously claimed that the recent NHS reforms could be seen from space. If he visits China, he will need to revise his analogy. My participation (on behalf of HSMC) in a health care `trade mission’1 to China (led by Ken Clarke MP) in January 2014 brought home the scale of change and enormity of the challenges facing China and its health care system.

The ramifications of China’s economic growth are being felt in all aspects of society, not least public services. Rising ambitions and expectations amongst the public are presenting enormous challenges to the Chinese government as it moves from a command-and-control to a mixed market economy. With inflation and unemployment remaining stable and economic growth remaining (moderately) strong (currently 7.5% pa), China may be able to meet growing demands for the time being. However, rising (income and geographical) inequality may yet threaten this.

Until about 30 years ago, 20% of China health care costs were out-of-pocket expenses, with the rest met by the state. Then, health care reforms made hospitals take care of their own finances, as commercial entities. However, such incentives led to over 50% of hospital income currently being derived from drug sales and unnecessary medical procedures.

The Chinese government is now seeking to devolve away from the centre, to reduce bureaucracy and shift from (direct) provision to regulation. So far, the agenda seems remarkably similar to English health care reform. Indeed, many Chinese policy-makers and practitioners have a high admiration for the NHS, seeking to learn from it and even emulate it.

Yet, enormous challenges remain for the health-care system. These include:

Scale of change: In the past 10 years, over 100 million people have migrated to cities and even more will move in the next 10 years. Meeting the health needs of such a population is becoming increasingly difficult. For example, just 30 minutes from Beijing (admittedly by the very fast Harmony train) is Tianjin, a city of over 12 million, with 304 “hospitals” and over 2000 “village health rooms.” The pace of change is stretching existing capacity and capabilities here, as elsewhere.

From secondary to primary care: Hospitals dominate the health care landscape. In China, 90% of health care contacts are in secondary care, unlike the NHS where 90% of contacts are in primary care. Although the policy rhetoric is to move away from existing funding steams at prospective payment models (similar to PbR), the shift to primary care remains problematic. For example, minor surgery in primary care has largely disappeared. Moreover, the public has expectations of seeing a `specialist’ in secondary care. The continued dominance of secondary care and the weak infrastructure in primary care might augur higher costs and reduced access in the long term. This could exacerbate health inequalities. Current investment in primary care facilities will remedy this situation somewhat but the scale of the challenge may hamper such ambitions.

Health spending: China spends 5.2% of its GDP on health care (compared to 9.3% in UK)2. In the past decade, there has been a growth in social insurance coverage. In some places, it is currently over 90% whereas it was only 15% ten years ago. Packages of essential care are still provided by the state. Despite such social insurance, patients still make significant co-payments of 40-60% of the costs of their care. In such circumstances, it is understandable that the public seek to save as much of their income as they can, not least for cases of catastrophic health care costs3. The effect across the country is an economy unbalanced towards investment and not consumption.

Corruption remains a significant challenge as, in some sectors, it is endemic. Some strides are being made to address this. The GSK case of bribery has become a notable illustration of the state’s commitment to tackling this issue4. Corruption has also, some claim, had an antagonistic effect on doctor-patient relations (given the role of the former in prescribing drugs).

Social determinants of health: Throughout the week of the visit, `smog’ pollution was ever-present. Although we visited only cities (where pollution might be expected to be at its worst), train travel between them revealed persistent `grey’ skies. Combined with on-going urbanisation, reliance on coal fired power stations, and growing car usage, deleterious health effects will be substantial. Rising life expectancy (2.4 years increase in the last decade, for example) may not be sustainable. Moreover, policy-makers are especially concerned with models of care for the growing elderly population and those with associated conditions such as dementia.

A final word is merited about purpose of the `trade mission.’ it was interesting to note the mix of 50 or so delegates from the UK – from IT companies, the NHS and universities. While IT companies had a particular focus on digital health, the NHS (mostly specialist Trusts) was exploring the development of education, research and commercial links which may ultimately create a new income stream for the NHS. For universities, there was interest in advancing existing research and educational programmes. The University of Birmingham has a major collaboration with Guangzhou. HSMC has won British Academy funding to conduct a learning network on health care reform in China (see HSMC latest Newsletter). To that end, my visit helped HSMC pursue yet more international links and in doing so, revealed familiar challenges of health care reform in a completely different context.